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Problems Getting Paid In The Past Over the past 20 years, I have been searching for the reason or reasons why bankruptcy judges make it so difficult for bankruptcy attorneys to get paid in Chapter 13 consumer bankruptcy cases. This goes all the way back to the early 1990’s when some judges would simply not+ Read More
The post Some Judges Making It Difficult For Bankruptcy Attorneys To Get Their Fees Ordered appeared first on David M. Siegel.

Delbert Services Can’t Hide Behind Indian Tribe law–4th Circuit Delbert Services is a debt collector, collecting bad debts for the internet payday lender, Western Sky. Western Sky has been shut down for a couple years.  Their “payday loans violated a host of state and federal lending laws.”   Delbert Services has rocked along, collecting those […]
The post Delbert Services Can’t Hide Behind Indian Tribe by Robert Weed appeared first on Robert Weed.

Georgia may soon have a new law governing wage garnishments and bank account levies.  But the news is not all good.You may recall that back in September, 2015, I reported that federal judge Marvin Shoob had issued a ruling that invalidated on Constitutional grounds bank account levies in Gwinnett County, Georgia. A man named Tony Strickland sued the Gwinnett County clerk of court after his bank account containing workers compensation and Social Security funds was seized by a credit card company that had sued him. Mr. Strickland argued, and Judge Shoob agreed, that the credit card company had an affirmative obligation to notify debtors like Mr. Strickland that certain funds (like workers’ compensation benefits, Social Security benefits, welfare payment and similar benefits) were exempt from garnishment.Although the federal judge’s ruling was limited to bank account levies in Gwinnett County, most legal experts concluded that the principle set out in the judge’s order was applicable generally to all bank account levies and wage garnishments within the state of Georgia.Following this ruling, most judgment creditors stopped or carefully audited all post-judgment collection activities.New Georgia Notice RequirementsIn response to the federal judge’s ruling, several Georgia state legislators have introduced bills to modify Georgia’s post-judgment collection laws to meet the standards set out by Judge Shoob.Senate Bill 255, passed on Tuesday, February 2, 2016 requires creditors to notify debtors that money originating from Social Security, workers’ compensation and welfare is protected from seizure. The bill now moves to the state House, where it is expected to pass, and then to Governor Deal, who is expected to sign the bill into law.What does this mean to you?First, you need to understand that the proposed legislation doesn’t change the protected status of benefits received from workers comp., welfare or Social Security. Those benefits have long been protected whether in check form or after they have been deposited into your bank account. The new law is mostly about providing notice.What this new law may do is reduce the pressure on struggling debtors who are trying to survive on benefits. If your only source of income is workers’ comp or Social Security, for example, and a debt collector calls to demand payment, that bill collector will also have to notify you that your benefit payments are protected from seizure. We may see fewer instances of bill collectors intimidating confused and frightened debtors into issuing post dated checks, or worse, allowing electronic access to bank accounts.Presumably judgment creditors would have some burden to investigate whether the accounts of judgment debtors contains protected money and they would be liable for damages if they fail to honor the protected status of seized funds.It’s Still “Buyer Beware” for Georgia ConsumersIf you are on the receiving end of a judgment, I think that you still need to take steps to protect yourself. First, you need to be careful about co-mingling your benefit funds with other monies. Only funds directly attributable to Social Security, workers comp., and welfare are protected (and these funds remain protected even after deposit). A problem arises, however, when these protected funds are co-mingled with unprotected funds such as income from part time work, rental property income, or wages earned by a spouse if that spouse is also a judgment defendant.You don’t want to be in a situation where your possibly protected funds are seized and you have to hire a lawyer to go to court to argue that some or all of the funds seized are exempt from garnishment or levy.You would be wise to segregate your funds by asking your bank to create a sub-account of your main checking or savings account that contains only protected funds. And if you have any cash in unprotected accounts, use those funds first to pay necessities.I would also continue to advise my Social Security disability and workers’ compensation clients to protect themselves by notifying their banks and the suing creditors that they have a protected subaccount and to stay away from this account. If the creditor ignores your written notice, you would have an even stronger claim for damages against that creditor or collection agency.Don’t Ignore LawsuitsFinally, I want to again remind you about the importance of taking action if you are sued. Back in September, 2015 I wrote a post entitled Don’t Fall Prey to Illegal and Immoral Behavior by Debt Buyers. The gist of that post was to warn you that there are companies – debt buyers – that purchase stale debt for pennies on the dollar and attempt to collect on it. Stale debt refers to accounts for which the statute of limitations for collection has expired. In other words, you have no obligation to pay a statute of limitations barred debt.However, if you don’t know that the statute of limitations has run and an aggressive bill collector calls you, you might agree to pay the debt and even reboot the statute of limitations. In more egregious cases, debt buyers actually sue unsophisticated debtors to collect stale debt and if the debtor does not respond and deny the claim, the debt buyer may obtain a judgment that can be turned into a wage garnishment or bank account levy.The big picture here is that consumers still have relatively little protection against well funded credit card companies, collection agencies and debt buyers. My colleague John Skiba, a nationally known bankruptcy and debt defense lawyer in Arizona, notes that in his jurisdiction over 95% of “junk debt buyer collection lawsuits” end up in a default judgment. In other words, 95% of collection defendants ignore lawsuits.  I suspect default rates in Georgia are similar.While a bankruptcy lawyer can sometimes undo the damage, you may find yourself paying a lawyer to deal with a problem that could have been easily dealt with early on.This is why it is so important to always take action if you receive a lawsuit or even if you hear a rumor that you are being sued. Most of the metro Atlanta courts offer electronic access and I can usually find out in a few minutes if there is a pending or defaulted lawsuit.Again, despite the efforts of the Consumer Financial Collection Bureau, and despite the new notice requirement that will likely become part of Georgia law, you have to be diligent and advocate for yourself. If you are facing collection it truly is a jungle out there.I’ll leave you with a quote from Georgia State Senator Jesse Stone, who filed Senate Bill 255: “the sooner we get it in the law, the sooner everybody will be back in the business of collections.” If you are struggling with overdue consumer debt, that certainly does not sound like good news.The post Georgia’s Likely New Pre-Garnishment Notice Not All Good News appeared first on theBKBlog.

Depriving local governments of tax revenue is like cutting off oxygen to the body–they can’t live without it.  Local governments and schools in Nebraska depend on a steady flow of real estate tax revenue to keep their doors open.
To prevent cash flow problems caused by homeowners who fail to pay real estate taxes on time, Nebraska county treasurers  sell Tax Lien Certificates to investors for the unpaid taxes.  The investors earn 14% interest on their investment and if the certificates are not redeemed by the homeowner within 3 years, the investor make take ownership of the property by requesting a Treasurer’s Deed.
Although the investments are subject to risk, the potential to earn staggering profits is significant.  I’ve seen homes worth $100,000 lost for unpaid taxes of less than $5,000.  Most taxpayers over the age of 65 are not required to pay real estate taxes if they apply for the Homestead exemption annually, but with advanced age comes a loss of memory and it is not uncommon for the elderly to lose their homes when they fail to apply for the exemption.
WILL FILING BANKRUPTCY RECOVER A HOME LOST TO UNPAID TAXES?
A recent case from the 7th Circuit Court of Appeals provides an example of how filing bankruptcy may allow a homeowner to recovery a home lost for unpaid real estate taxes.  In that case (In re Smith, 526 B.R. 737), Keith and Dawn Smith owed $4,046.26 of real estate taxes.  The Illinois county treasurer sold a tax lien certificate to an investor for the unpaid taxes and when the Smiths failed to redeem the certificate by not paying the tax and accrued interest within the required time, the investor became the owner of the home.  The investor subsequently sold the property to another investor for $50,000.  Wow, that is almost 10 times the original investment price!
The Smiths filed a Chapter 13 bankruptcy and commenced an adversary complaint seeking to avoid the tax sale of their property.
BANKRUPTCY CODE SECTION 548(a)(2)
Under Section 548 of the bankruptcy code a transfer of a debtor’s property made within 2 years of the bankruptcy petition for less than “reasonably equivalent value” may be avoided.  May a person in bankruptcy utilize section 548 to recover a home lost in the prior 2 years to a tax certificate sale?
CASE LAW BACKGROUND: BFP v RESOLUTION TRUST CORP
As a general rule, homes lost to foreclosure sales cannot be recovered even if the foreclosure sale price is significantly less that what a home would fetch if it were sold through a normal real estate listing.  In 1994 the Supreme Court issued a ruling in BFP v. Resolution Trust Corp (511 U.S. 531) stating that the sales price obtained in a foreclosure sale is considered “reasonably equivalent value” as a matter of law, even if the sales price is far below what a property would sell for under normal market conditions.  In other words, there is no opportunity to complain about the low price because that is just the nature of foreclosure sales where buyers must pay the full purchase price at the time of sale or shortly thereafter.  As long as the state foreclosure procedures were followed the sales price is final.
The 7th Circuit,  however, pointed out that the Illinois tax sale procedure is unlike the competitive bidding process present in the BFP case.  In fact, the Supreme Court specifically stated that the BFP opinion “covers only mortgage foreclosure of real estate.  The considerations bearing upon other foreclosure and forced sales (to satisfy tax liens, for example) may be different.” (page 537, footnote 3).
There is no competitive bidding process in the sale of tax certificates in Illinois.  Rather, Illinois utilizes an Interest Rate Method when selling tax certificates that does not involve competitive bidding between prospective investors. (Under the Interest Rate Method there is competitive bidding as to the interest rate paid, but not as to the price of the certificate.)  Because Illinois does not employ competitive bidding when selling tax certificates the sale is subject to being avoided in a bankruptcy proceeding if the sales price is substantially less than the true market value of the property.
TENTH CIRCUIT OPINION: SHERMAN V. ROSE
The 10th Circuit Court of Appeals has also allowed debtors to attack property transfers involving unpaid tax certificates.  In the case of In re Sherman, 223 B.R. 555, a Wyoming property was transferred to an investor for unpaid taxes of only $500.  Under Wyoming law, the tax certificate was sold to an investor “selected in a random lottery for the amount of the outstanding taxes. The Wyoming tax sale statutes do not permit a public sale with competitive bidding.”  Since there was no competitive bidding in the sale of the tax certificate the 10th Circuit ruled that the sale was subject to the bankruptcy court’s avoidance powers.
NEBRASKA TAX CERTIFICATE SALE PROCESS
Nebraska utilizes a “Round Robin” format very similar to Wyoming system in selling tax certificates.  The procedure is provided in Nebraska Statute 77-1807. (A good description of the process is provided here.) In a Round Robin auction investors must register to buy certificates that are sold on the 1st Monday of March each year.  The order of the auction is determined by randomly selecting an investor from the list of registered participants.  There is no competitive bidding on the price of the certificate.  Each certificate is sold for exactly the amount of the unpaid taxes.
There is no case law in Nebraska on this topic yet, but it would appear that the Nebraska procedure for selling tax certificates is substantially the same as the Illinois and Wyoming procedure and debtors (as well as Chapter 7 Trustees) should be able to recover their homes lost to a tax certificate sale if the sales prices is substantially less than the home’s fair market value.
Keep in mind that this option is only available when a tax certificate buyer obtains title to the property by acquiring ownership through a Treasurer’s Deed.  Property purchased by investors at a real tax foreclosure auction sale that involves competitive bidding would probably be protected under the Supreme Court’s BFP decision.
Have you lost a home in the past 2 years due to unpaid real estate taxes?  Contact our office for a free consultation regarding your options.
Image courtesy of Flickr and davitydave.